R.I.P. Trade Finance Fraud & NBFCs: A Real Use Case For Blockchain, Finally?
No More Letter of Credit Fraud?
R.I.P. Trade Finance Fraud & NBFCs issuing ‘’non-rated’’ letters of credit.
Blockchain is revolutionizing trade finance in a number of ways. It can help with the following:
1. Reduce the number of steps it takes to complete a transaction, which cuts down on costs and increases efficiency
2. Make it easier to track payments made by each party involved in the trade, so there’s less chance for fraud or mistakes
3. Allow more parties to have access to relevant information about a transaction at once, which helps them make better decisions about whether or not they should invest in that particular deal.
Imagine a world in which international trade was conducted on a level playing field, where all parties — buyers and sellers alike — could be confident that they were protected by secure and transparent systems.
A world in which the middlemen of trade who currently control the market could no longer charge exorbitant fees for their services.
A world in which even the smallest players could participate in global markets without having to worry about getting burned by fraudsters or scammers.
And imagine a world in which emerging economies could leapfrog traditional financial systems to create large-scale deficits that would help lift their citizens out of poverty.
$6.5 Trillion Trade Finance Gap
New research from the International Chamber of Commerce (ICC) estimates an additional $1.9 to $5 trillion of trade finance is necessary simply to return to the 2019 levels.
Factoring in this estimation, along with the existing 2019 trade finance gap ($1.5 trillion), means we now need between $3.4 and $6.5 trillion to be able to meet the SDGs. In the ongoing debate as to how this can be achieved, the role that banks can play should not be overlooked.
The Global Trade Finance Market is estimated to be USD 61.04 Bn in 2022 and is expected to reach USD 85.85 Bn by 2027, growing at a CAGR of 7.06%.
The industry has been traditionally dominated by banks and other financial institutions.
However, with the emergence of blockchain technology, new players have entered this market.
One such player is R3, which is quickly gaining momentum as it is revolutionizing the way businesses around the world do their financing.
The trade finance market simply isn’t digitized
The trade finance market is one of the most inefficient and paper-based in the world, but it isn’t just a headache for banks and their clients.
It’s also a burden on businesses that have to wait months to receive payments from buyers overseas.
The slow and complicated process of sending documents through snail mail can take weeks or months, which means that even though you know your payment has been approved, you still don’t get paid until everything goes through — and sometimes not even then!
And this doesn’t just happen once: often, if there is an issue with any step of the process (either with your documents or with those presented by the buyer), then everything must be started over again from scratch because no one knows where they left off originally.
Existing systems are insecure and susceptible to fraud
Most existing are not digital and leave the possibility for bad actors such as NBFCs to participate. Bad actors such as non rated financial corporations issuing worthless letters of credits are systematically disqualified since they can’t even qualify to join new trade finance platforms.
The process is designed to exclude those who don’t have a history of reliable, trust-worthy behavior. This prevents new members from joining without first proving their worthiness, and it ensures that only companies with a solid track record are allowed to participate in the network.
When bad actors are excluded from the network, they cannot use its services or benefits, which creates a strong incentive for them to improve their practices.
Additionally, the systems are slow, both in terms of how long it takes for transactions to be confirmed and how long it takes for payments to clear.
Blockchain technology is the perfect solution for this market
The lack of transparency and security in this industry has led to a fragmented ecosystem that wastes time and money for businesses, banks, and governments.
Blockchain technology is the perfect solution for this market. It’s decentralized, transparent, and secure — three characteristics that are critical for trade finance but not currently available in any other software solutions on the market.
Blockchain technology will save money for companies and governments by eliminating middlemen costs associated with cross-border payments; it will also make trade finance more efficient by providing real-time visibility into transactions so that everyone involved can see where their goods are at any given moment in the supply chain process
Trade finance has the potential to expand into emerging markets
The use of blockchain technology can help provide new opportunities for people who otherwise wouldn’t have access to traditional financial services.
Blockchain enables the creation of new markets that were previously unavailable before due to their geographical location or size.
Easy Trading Connect’s platform is the future of trade finance
Easy Trading Connect’s platform is the future of trade finance. Built on blockchain technology, it is secure, transparent and easy to use. It can be used by anyone in any market or industry to trade in any currency — whether that’s dollars or euros, pounds sterling or yuan.
So, what does all this mean?
The companies have developed platforms that are at once secure, reliable, and easy to use for both businesses and banks. In other words, it’s the solution many have been waiting for.
Financely is a trade finance company that offers a wide range of services to businesses, including:
➤ Liquidity sourcing
➤ Letter of credit issuance and guarantee
➤ Proof of funds issuance
➤ Payment terms negotiation
Financely Group was founded by a group of forward-thinking entrepreneurs & bankers who saw the need for modernized trade finance processes — especially for clients in emerging & frontier markets.
Since that time, we have worked closely with our clients to develop new methods of doing business — and we’ve been able to achieve some incredible results. Our clients can now expect:
➤ 24 hour turnaround time on all requests
➤ Real-time visibility into their trade transactions through ETC
➤ A streamlined process from start to finish
We don’t do business with non-rated banks or archaic trade finance systems. Instead, we use blockchain trade finance consortia that include the world’s most reputable banks.
That way, you can be sure that your money is safe — and you can rest easy knowing that we’ll get you the required liquidity.
If you need a letter of credit or proof of funds, we’ll get them for you within 24 hours notice — so if you want to expand your business internationally and need help getting started, Financely Group is here for you.